Long-term Prospects of the BIOTECHNOLOGY INDUSTRY Byung-Hwan Hyeon, Ph.D. The Present Situation of the Biotechnology Industry A. Definition and Scope The OECD defines biotechnology as activities that apply scientific logic and technologies to organisms, parts or part of an organism, products, and product-related models in the process of modifying living organisms or non-living things with the aim of producing knowledge, goods, and services (OECD data, 2004). Further, the scope of the bio-industry, or the biotechnology industry, according to the OECD criteria, is classified into medicine, agriculture/livestock and farming/fisheries, the environment, and energy markets. In particular, in the case of the medicine market, products derived from both biotechnologies and medical and chemical technologies account for 90% of the total market; the medicine market in the biotechnology industry is understood to include small-molecule compounded medicines. B. Biotechnology Industries and Their World Market Size The biotechnology industries are expected to cover a wide range of areas, ranging from the burgeoning medicine industry, solutions to food problems in the area of agriculture, livestock and fisheries, the development of technologies for tackling environmental problems such as environmental rehabilitation and waste treatment, the development of bio-energy to replace dwindling petroleum energy, to bioelectronics and others. This report focuses on the medicine industry which has the greatest addedvalue and is the acme of the biotechnology industry by describing its market trends, latest technological developments, and future prospects. The worldwide biotechnology industry accounted for US$540 billion in 2004, and has been estimated at US$600 billion for 2005 and as much as US$1 trillion for 2010. The medicine market accounts for 90% of the total biotechnology market Table 1. The medicine market, representing over 90% of the biotechnology industry, saw massive sales of major medicines last year alone as shown in Table 2. 934 APBN Vol. 10 No. 17 2006
Table 1. Biotechnology Industry and Its Estimated Market Size. Bio-industries Major products Current stage Market size for 2010 Major (US$100 million) participatory corporations Medicine Cholesterol lowering Commercialized 9,700 Pfizer, GSK, Amgen, drugs, Genetech erythrocyte growth accelerators Biotechnology Cell therapy, Basic principles 562 Aastrom, ONYX, drugs gene therapy, have been Vical transfusion drugs discovered, and applied research is underway. U-Health Bio chips, Applied 300 Affymetrics, operational systems technologies Medtronics accumulated Living modified Crops, animals, fish Commercialized 150 Monsanto, Syngenta organisms Biotechnology Image-based Commercialized 850 HP, GE, Agilent equipment diagnostic equipment, analyzers Biotechnological Microbial Initial 160 Shell, BP applications in decomposition, commercialization environment and biotechnological stage energy fuels Biotechnological Replacing existing Initial 250 Cargill, BASF, processes processes commercialization DuPont stage Source: Samsung Economic Research Institute reports, IMS health, Jain PharmaBiotech Report 2005, etc. APBN Vol. 10 No. 17 2006 935
Table 2. Worldwide Sales of Major Medicines (2004). Product Name Sellers Sales Applications Marketing (USD 100 million) Year Lipitor Pfizer 108.6 Lowering cholesterol 1996 Zorcor Merck 52.0 Lowering cholesterol 1991 Seretide GlaxoSmithKline 45.0 Asthma treatment 1998 Norvasc Pfizer 44.6 Hypertension treatment 1992 Zyprexa Eli Lilly 44.2 Schizophrenia 1996 Nexium AstraZeneca 38.8 Gastric ulcer treatment 2000 Procrit/Eprex Johnson & Johnson 36.0 Anemia treatment 1990 Zoloft Pfizer 33.6 Depression treatment 1991 Effexor Wyeth 33.5 Depression treatment 1993 Plavix Bristol Myers Squibb 33.3 Thrombus resolvent 1997 Celebrex Pfizer 33.0 Arthritis treatment 1998 Fosamax Merck 31.6 Osteoporosis treatment 1995 Epogen Amgen 26.0 Anemia treatment 1989 Aranesp Amgen 24.7 Anemia treatment 2001 Enbrel Amgen 19.0 Arthritis treatment 1998 Neulasta Amgen 17.4 Anti-cancer supplementary 2002 Rituxan Genetech 17.1 Anti-cancer drug 1997 Viagra Pfizer 16.8 Impotence treatment 1998 Actos Takeda 16.9 Diabetes treatment 1999 Gleevec/Glivec Novartis 16.3 Anti-cancer drug 2001 Source: Top 400 prescription drugs (Med Ad News, 2005) C. Trends in Biotechnology R&D and Technologies The biotechnology industry, led by the United States, Great Britain, Japan, and Germany, is witnessing fierce competition between the different corporations. The six leading nations have invested 88% of the world s total R&D costs in this sector, and the 20 leading corporations, most of which are situated in the United States, represent 60% of the total market. Multinational pharmaceutical companies based in the United States are increasingly stepping up investment in R&D; in 2004, they invested a massive USD 38 billion, greater than the U.S. National Institute of Health s total R&D investment of about USD 28 billion. However, compared with the ever-increasing investment in R&D, these companies come up with a smaller number of products that successfully undergo novel drug development and commercialization, and thus, to ensure efficient R&D, form alliances with biotechnology ventures to increase investment in securing pipelines. Table 3 shows the top ten domestic and foreign pharmaceutical companies as of 2004 in terms of R&D costs compared with sales. The focal social issue most closely related to the development of the bioindustries concerns the completion of the human genome project, and its direct and rapidly projected benefits will be channeled into the medicine industry. Although the medicine market as of 2005 exceeded the already massive USD 500 billion, the era that follows the genome project will see an unfathomably large figure. Thus, research into new medicines for the treatment of diseases and enhancing the quality of life by exploiting the outcome of the human genome project could well become the area that creates the largest economic value of the 21st century. 936 APBN Vol. 10 No. 17 2006
Table 3. Top 10 Domestic and Foreign Companies (R&D Investment Ratio). Ranking Domestic Foreign Ranking Company name Investment Ratio (%) Company name Investment Ratio (%) (million won) (USD 1 million ) 1 LG Life Sciences 52,103 24.90 Eli Lilly 2,350.2 18.7 2 Hanmi 26,405 8.33 AstrZeneca 3,451.0 18.3 3 Yuyu, Inc. 3,737 6.52 Aventis 3,311.2 16.4 4 Boryung, Inc. 4,217 6.46 Sanofi-synthelabo 1,490.3 16.4 5 Daewoong Pharm. 19,870 6.46 Pfizer 7,131.0 15.8 6 Kun Wha 3,135 5.66 Novartis 3,756.0 15.1 7 Yuhan Corporation 19,246 5.65 F Hoffman-Ra 3,478.0 15.0 8 Bukwang Pharm. 5,798 5.12 Merck 3,178.1 14.1 9 Ildong 9,822 4.98 Wyeth 2,093.5 13.2 10 Daewon Pharm. 1,913 4.77 GlaxoSmithKline 4,531.6 13.0 Average 7.2% 15.6% Source: Parliamentary probe data on Korea Health Industry Institute, 2005 Prospects of the Biotechnology Industries A. Overview In the medicine market, which represents over 90% of the biotechnology market, the market for anti-cancer drugs, antibiotics and other existing drugs is important, but the market for novel drugs aimed at improving life quality for treating ageing, stress, obesity, and Alzheimer s disease, and bolstering memorization ability, is likely to be even more crucial. For instance, novel drugs such as Sanofi Aventis, the soon-to-be-marketed obesity treatment drug, Acomplia, and Pfizer s and Neurocrine Biosciences sleeping pill, Indiplon will each generate an annual turnover of US$6 billion at their expected peak. This achievement was made possible by the development of cutting-edge biotechnologies through research into geonomics and protein structure and function. Given the necessity for such state-of-the-art biotechnologies, the diversity of human desires, and the ageing of society, efforts are underway to discover drugs that will improve life quality and fulfill the ultimate human goal of pursuing a healthy, happy life. APBN Vol. 10 No. 17 2006 937
In the 21st biotechnology age, people can pursue lifestyles focused on staying young and healthy rather than concentrating on securing foods and survival, as was the case in the past. Furthermore, since obesity, stress, and other symptoms are closely related to Alzheimer s disease, diabetes, cancers, and various other diseases, these symptoms, if not cured, will inevitably lead to serious life threats. In the 21st century, these symptoms are being categorized along with serious diseases, and advanced pharmaceuticals companies, having understood this, are positively striving to discover novel drugs aimed at improving peoples life quality and enriching their lives. Biotechnology industries, as the state s primary growth engine, should find the best strategies to discover world-class new products and enter advanced markets. In the novel drug industry with the highest added value, it is the venture firms in biotechnologies rather than the existing pharmaceutical companies and large corporations that are currently are taking on bold challenges. Likewise, Korea s biotechnology industries are developing by fostering venture firms in biotechnologies and thus discovering world-class novel drugs. In response to such efforts, the government, for its part, has left open the door to the tech-heavy KOSDAQ stock market (like the U.S. NASDAQ) to the venture firms in technologies which have yet to boost their profitability, thus injecting huge private funds into the venture firms on top of the government s limited budgets for research and helping them evolve into world-class biotechnologies venture firms. So, ten years from now, Korea s biotechnology industries will become the nation s effective growth engine for the future. B. Appearance of Asian Corporations The United States is leading the world s biotechnology industries, while Asia, Korea, India, China, Japan and Singapore are rallying their national forces behind the development of the biotechnology industries. The Ernst & Young 2005 report forecast that Korea, Singapore, Sweden, and others have selected the biotechnology industries as their respective growth engine, have been intensively investing in these areas from a long-term perspective, and have created good research environments; as such, it is thought that they may outstrip the United States in this field. Dr. Byung-Hwan Hyeon Director, Biotech Policy Research Center Address: Korea Research Institute of Bioscience and Biotechnology Daejeon 305-600, Korea Email: bhhyun@kribb.re.kr Furthermore, in the case of novel drugs, Korea and China joined the ranks of nations developing novel drugs in 2003 and 2004 respectively. In the case of Korea, the country is relatively less costly, and has the superior research manpower and technologies required to compete with nations whose multinational pharmaceutical companies are at the stage of discovering candidates for novel drugs that can secure intellectual property rights. Likewise, Korea boasts superior manpower in the biotechnologies, particularly in the fields of medicine and chemical and structural biology, as well as cutting-edge infrastructure facilities secured through the Ministry of Science and Technology s huge investment in the G7, such as light accelerators, high magnetic-field nuclear-magnetic resonators, and super computers, and is the tenth nation to obtain FDA approval for its novel drug. By taking advantage of these strengths, if Korea intensively invests in the development of novel drugs, it will be able to boost national wealth not only through its semiconductor industry and IT industries, but also through its biotechnology industries, and thereby enter the ranks of the G7 nations in the 21st century. 938 APBN Vol. 10 No. 17 2006